Family Office Scaling: Choosing the Right Tech for Data & Growth

How Family Offices Scale for Success

As family offices become more institutionalized there is growing demand for modern technologies to scale financial data processing to enable better, faster decision making.

Family offices are turning to their account aggregation platforms, consolidated portfolio management platforms, and/or reporting platforms to help them manage their complex wealth holistically – regardless of the complexity of investment types, custodians, or ownership structures.

But the underlying challenge facing family offices is understanding which platforms will help them scale and which will not. To understand this, we must first define what “scale” means – not in asset management and advice, but in the technologies that allow the family office to “do more with less”.

What Is Scale?

The purpose of any technology is to empower each user to accomplish an increasing amount of work with fewer resources.

In financial services most people think of “scale” in terms of assets under management (AUM). That measure is true for investment advisors, but AUM has little to do with measuring scale for technology platforms. This is especially true when UHNWIs can have literally hundreds of billions worth of a single stock position.

For family offices requiring technology to solve the problem of data aggregation, portfolio management and performance reporting scale is the ability for software to process increasing volumes of transaction-level data without sacrificing data quality or requiring additional manual work and employee headcount.

How Does the Industry Address Scale?

Unfortunately, nearly all family office technology platforms place the burden – and cost – of managing and correcting data onto the users. As data volumes increase or become more complex, the operating burden and total cost of ownership increases because those technology platforms cannot – and do not – scale.

Most family offices who place priority on high degrees of data accuracy require 1-3 full time employees dedicated to managing data within their portfolio management and reporting platforms. Typical data challenges include:

• adjusting for corporate action events
• correcting bad end-of-day prices from their bank or manager
• making adjustments for accruals
• researching discrepancies from bank data feeds

Depending on the demands from the family office stakeholders, family office staff can devote several hours a day – or in many cases over 2 weeks each month – managing data before they feel confident the data is accurate enough to be reported.

The time and cost associated with well-known big-box brand name platform in the family office space – and even the institutional segment – can be as high as 2x the cost of the software license.

Why Isn’t Scalability Handled a Smarter Way?

And the big-box software providers won’t change their pattern of throwing expensive teams at the scalability problem until buyers in the family offices start demanding more from their providers. Not to mention, delivering scale—true global operating scale—is exceptionally hard to achieve from a technology point of view, and requires several key technologies/workflows, including:

• A unified security master – which normalizes financial data in a way that prevents duplication and redundancy in securities and values, driving greater efficiency in managing data and effecting updates/changes when needed – e.g. a single security identifier matching across multiple custodians.
• A global/master investment book of record (IBOR) – which enables the platform to independently calculate trades, etc. and therefore cross-check against bank feeds to detect and correct errors before they reach dashboards/reports (bank feeds historically have 18% error rates). This dramatically reduces the end-of-period correction activities that family office staff find so unbelievably frustrating.
• A centralized operations team with a ‘one-and-done’ operating model – which refers mainly to the data design structure setup in such a way as to enable a small, highly-experienced team to make centralized changes to securities (as from market events) where the changes then propagate throughout all securities, all portfolios, all clients – e.g. ‘one-and-done’.

Private Wealth Systems has made a commitment to tackling and solving these hard challenges. Learn more by visiting us online or scheduling an exploratory conversation.

What Benefits Emerge with a Scalable Portfolio Management and Reporting Platform?

Private Wealth Systems is a truly scalable portfolio management and reporting platform, offering the technologies listed earlier among other reporting and visibility differentiators. When designed correctly, a scalable portfolio management and reporting platform offers several advantages to family offices and their clients.

• Cost Efficiency: By accommodating growth without requiring additional resources or technological upgrades. Scalable solutions are 30% to 60% more cost-effective.
• Peace of Mind: Delivering accurate data at mass-scale giving decision makers a high degree of confidence when analyzing which of their managers and strategies are working and which are not.
• Improved Decision Making: Leveraging scalability to enable the capture and processing of far more data – as much as 3x more transaction level data – delivering greater transparency, at faster speed, for better decision making.
• Enhanced Risk Management: With more data – and greater accuracy – you can perform better risk assessments and take action that is necessary to preserve complex family wealth.
• Better Client Service: Streamlined processes and improved efficiency via scalability technology yields time back to experienced teams which can in turn deliver enhanced client service, including faster, more accurate and customized reporting.

At a Glance

For family offices, “scale” does not mean—and should not mean—increased AUM. It refers instead to an office’s ability to handle an increase in transactional volume / data processing. As you’d expect, most offices turn to their technology platforms for help in this area but are let down through the need to either insource or outsource bandwidth to solve the challenge. Costly, and not a true solution offering scalability.

Yet portfolio management platform scalability is a necessity for family offices. By investing in a scalable portfolio management solution, family offices can properly leverage technology to effectively and efficiently manage growth, increased complexity, and risk – far beyond what even a larger big-box team can sustain – for uniform cost.

Private Wealth Systems’ cloud-based portfolio management platform provides critical insights investors need to effectively manage portfolio performance, risk and liquidity – delivering an accurate pulse of the portfolio. Leading UHNW individuals, family offices and private banks leverage Private Wealth Systems to report on multi-asset class portfolio performance and evolve complex investment portfolios over time.

Learn More

Contact Private Wealth Systems today to learn how our portfolio management platform can help you increase efficiency and improve client service.